Ahead of fridays g20 summit. At 10 00 we get factory and goods orders for the of may. This afternoon the fed will reap the fomc minutes of last weeks meeting. President trump will be heading to europe for the g20 summit. The question is of may. This afternoon the fed will reap the fomc whether they are going to spend the time talking about geopolitics or trade. Heres kevin cirilli. We thought it was going to be all about trade. It doesnt look so much right now. It looks like its going to be all about north korea. The administration sending clear singles they are hoping to put pressure on north korea. As a result of their testing of an Intercontinental Ballistic Missile on the fourth of july. We should note that secretary of state Rex Tillerson has echoed u. N. Ambassador nikki haley who has called for there to be a laterl you in meeting this afternoon with the Security Council. I want to pull up a statement from the secretary of state who said in a statement that Global Action is required to stop a global threat. Any country that hosts north korean guestworkers provides economic or military benefits or fails to fully implement Un Security Council resolutions is aiding and abetting a dangerous regime. All nations should publicly demonstrate to north korea that there are consequences to their pursuit of nuclear weapons. This comes following Steve Mnuchins last week announcement that the administration was looking to pressure Chinese Companies including the bank to cut economic ties with north korea. David president putin has his own plan which doesnt appear to jive with what Rex Tillerson said. Things as the u. S. Should stop all military exercises south florida. Is there going to be a conflict between these countries . Yes. Policy the u. S. As well as south korea of north this testing koreas Intercontinental Ballistic Missile have also signaled in their own way for military missile test which are a direct result of that testing on yesterday. Vladimir putin President Trump scheduled to meet later this week at the g20. They are going to be every move these leaders make will be analyzed. Terrorism and north korea clearly the backdrop for these meetings. David no question north korea has gone to the top of the agenda. Angela merkel said lets talk about trade. Are they going to get to the subject at all . Yes. In addition to trade chancellor merkel would also want to talk about President Trumps decision to remove the u. S. From the paris agreement. All of that clearly a very backdrop than what we saw for the president s First International trip as he takes off on air force one later this morning on route to . David hes also going to have a meeting with Angela Merkel. How pivotal is Angela Merkel and the German Government right now . Crucial. Backdrop than the president already sending signals that is willing to work with the issue of north korea which would seemingly suggest a new type of geopolitical shift. As these Global LeadersWork Together and we have seen the political friction between chancellor merkel and President Trump. David thank you for reporting. Jonathan shifts to haven assets didnt last very long in the wake of north koreas missile test. Trump. David joining us now for more is carsten nickel. Great to have you on the program. Lets begin with we are seeing in north korea. We are about to found out that the United States needs Global Platforms like the g20 for Global Solutions to think like north korea. The whole situation reminds us of how difficult it is to find consent is on the global scale in a forum like the g20. I think we have come a long way from there. Global cooperation is not dead. We are seeing piecemeal cooperation between countries. On a global scale its becoming more and more difficult. Jonathan investors havent exactly been compensated for being fearful in 2017. The move in treasuries did not last long. Are the red wines for the markets when they look at a situation like north korea . The real challenge is you have to look at many different players with fundamentally different agendas. The russians and chinese are totally opposed to isolate north korea. Even in the western alliance if you compare the stands taken by japan and the u. S. And south korea and many europeans on the theres a huge question over how forceful do you want to position yourself. To me its this uncertainty that in the domestic politics of these rich western democracies. The president of the United States blurred the lines between Foreign Policy and Economic Policy towards china. They did not call china a currency manipulator because they thought china would help them with the issue that is north korea. Are we going to see some economic implications, Foreign Policy fallout . I think we are seeing here is forumsese International Work by package deals. If you want to rish agreement on Something Like north korea you need to make sure you are in a cooperative state of mind. When comes to issues such as Climate Change trade and so on. What we have seen so far on these other topics wasnt very constructive from the perspective of many other g20 members. Difficultmake it very to achieve consensus on other issues as well. David is if the g20 that may have an effect or is it an occasion for them to have a series of why lateral discussions . We have had a lot of bilateral discussions. Thats the point i was referring to earlier. The corporation is not that. Its happening on a bilateral or regional stage. Europeans are arriving very coordinated when it comes to Climate Change. Seems to be happening on the bilateral stage. A great photo opportunity. Carsten nickel, you will be sticking with us. Tacklingister may Prime Minister questions. Wednesday the same time every week. The leader of the opposition, jeremy corbyn. You can watch that live on your bloomberg tournament. David we will be turning to italian banks. The ceo of monte dei paschi will talk about restructuring his bank. Why he thinks this plan will work. , this is new york bloomberg. Jonathan monte dei paschi laid out a fiveyear Restructuring Plan that includes cutting thousands of jobs and selling assets as part of an agreement with the European Union that lets the bank received 6. 1 billion in state aid. Following the say result of many late nights is marco morelli. Great to have you on the program. Investors have seen this movie a couple of times before. The bank tapping investors for 8 billion euros requesting it twice in the park as well. Why is this restructuring land so different . Longawaited day. Longawaited plan. We have been negotiating with a number of european regulators since the beginning of january. I think it is the first time the precautionary recap model is actually applied to european i do believe a lot of attention has been paid to structure the plan. To have something which would votinghe bank to start again in a sort of stable and normal commercial framework. I think we did get there. Many investors in europe at the moment are confused by eu regulation and the spirit of the rules. We talked about this precautionary recapitalization plan. What have you said to people in the last 24 hours when they have asked you about whether europe is cheating their own rulebook to help banks like monte dei paschi. I talked for monte dei paschi and i can only opine on what we experienced in the last six months. I think there are rules which we were bound to comply with. Precautionary cap scheme, we did play by the rule. This is the reason why the negotiation actually took so long. Lots of different responsibilities. I think at the end of the day we are going to be under scrutiny on a permanent basis. There is going to be monetary interest fee appointed to check is to what extent the plan complying with commitments agreed upon with the european commission. We are concerned we did apply all existing rules. Some people say the eu is being a little bit more flexible with its own rules. From your standpoint is that a good thing that the european regulator is maybe being a little bit more flexible . In general terms rules need to be crafted and then implemented. We must have a sort of check point to see whether rules do actually function properly and whether rules need adjustments Going Forward. I think it is going to be a good case to sort of see to what scheme of therall precautionary cap actually works. Far as the bank is concerned i think for my Management Team, for all of the employees this is clearly a turning point. The dust has settled. There is clarity and transparency. On what the structure of the bank is and will be Going Forward. What is the impact of the final ofposal of 26. 1 billion gross npls . And the line and come up the rules asher far as the overall european scheme do work. Jonathan before we get into the target of your bank i just want to reflect on the following. It looks like the Institutional Investments got burned and return investments got protected. What do you say to people who say with this kind of situation the domestic investor is protected the Institution Investor is open to being bailed in. What do you say to those people that there is a hierarchy within the capital structure that the Retail Investor will be protected before the Institutional Investor . As i said we are applying a low bills approved by the italian congress. Not in a position to come up with a on the treatment of different bondholders. The reason we need to stick to the law and we need to behave accordingly. The plan and im referring to your question as far as bondholders institution of bondholders are concerned. I think the plan is such that the projections on the revenue side are quite conservative. There is once and for all solution which is going to be sale of a stock of npl. The cost of discipline which is going to be imposed to the Management Team is quite severe. To be a veryg strict monitoring. I would guess that bondholders which are going to be converted into ordinary shares might get. Ome satisfaction david we talked about cost discipline. What about lending discipline . The problem is in making loans that should not have been made. You have a clean start which is terrific for your bank. Are you changing the way you do business to make sure you dont make more nonperforming loans . It wasink we did change one of the key features in the plan we presented in october. We did change substantially responsibilities of the new credits throughout the network. Creditactually have people who are going to be in charge throughout the italian territory for new lending. For new approvals. In the commercial people will actually work along with them without any real responsibilities in terms of deciding and put the seal on a given file. Int is a radical change and we arenitoring already seeing returns in terms of the new flows of deterioration in the credit book in recent weeks. Jonathan when do you expect the bank to return to profit . You have a 1. 2 billion euro profit for 2021. When do you anticipate getting back into profit . The process of getting back to a sustainable topline trajectory and operating profit line and internal sustainable net profit, bottom line is something will require time. This is not an easy exercise. Billionhe bank lost 26 euros of commercial deposits. This is pretty much a bank in itself. Getting back to a stable commercial position requires a lot of effort throughout the chain from myself to the very colleague in a given brand. It will take time. I dont think none of us is a. Izard we are storytellers. We need realism, transparency. Everybody ought to know where the starting point is. In our business should the year where we start seeing real sustainable numbers. Jonathan 2019 to get things back on track. You mention the deposit outflows. You have lost clients. You have lost deposits. Is there anything recently to suggest that trend is starting to stabilize or maybe reverse . There has been a very clear sign in terms of direction which is q1 17. In q1 17 in spite of the environment, in spite of the fact that its clarity was not there in terms of the final outcome of the negotiation with the commission and the ecb, we did recover 5. 5 billion in a matter of three months of commercial deposits. A very clear message to the market in my opinion. These are facts. These are numbers. Sign that theear network of monte dei paschi is in a position to recover and get back to normal. Even more so. I saw these people in action. I have been ceo for nine months. Experiencet we all in the end of september isnt heard of. Ill think any given financial institutions. Managedany in general to fill this kind of pressure. Regulatory pressure. Media pressure. Commercial pressure. In spite of all of that in a matter of three months bank recovered 5. 5 billion of commercial deposits. This bodes very well for the direction we need to take from now on. Jonathan you mentioned your own tenure. The state will enter in july. What do you expect in terms of changes to governance. If you had any indications from the state that they would like you to remain as the ceo and would like to remain as the chief executive officer for the time being and the entirety of this plan . As a general statement i repeat what i have said already enough you given occasions. The ceo is decided by the board of directors and shareholders. Put forward your name yourself. As a general rule. I said to the italian minister in december that you are feel free to decide whatever. It is been useful to do. It would have liked to have myself serving as the eeo. Im very committed to this plan. Im very committed to monte dei paschi. If the board of Directors Think differently they should feel free to do so. Time committed and i repeatedly mentioned already the fact that i want to make this plan to fruition with my managing team. Jonathan thank you for joining us, marco morelli. The monte dei paschi join us from milan. London, head of equity derivative strategy and he joins us from london. Latest moves to stabilize the italian Banking System. Another pile of state aid going into another italian bank. Is that a good thing from the investment standpoint from where youre sitting and anyone who wants to get low european risk . I think so. If you look at the eurozone Banking Sector stories both in sector but banking also the bank have been looming large in the headlines. What we have seen is that despite the strict banking rules put in place by the European Union that we have seen some rescue plans and that allows us to focus on what is really the important point for the eurozone banking which is can we see continued credit growth and can we therefore see continued Profit Growth . I think that is crucial for a sector that has rebounded really quite strongly since late last year. We do need to see a return of. Onfidence Balance Sheets. More importantly the potential for earning the momentum to resume. We still have carsten nickels. It may be a good thing for italian banks. Is it a good thing for the eu . Is the eu really loosening up its rules . Is this eroding the authority of the eu to regulate banks . Theres a technical perspective on this question in brussels and probably the answer would be no. Its a pragmatic approach from the european side. Of course theres a political interpretation that runs along those lines especially in these bailout skeptic northwest european states. Finland, the netherlands and so on. Goingsk is if there is a impression of europe losing its rule that it will make it even more complicated to build out banking union. Thats the effect we are having on the european conversation. Onathan carsten nickel over in london right now is Prime Minister question times with theresa may taking questions from the opposition leader. Jeremy corbyn over in westminster in the house of commons. Situationan political involves brexit negotiations as well. What have we learned about how they are going to go . Learnednk what we have is the uncertainty remains huge and it is very difficult for the europeans to figure out whats actually going on in london. The very latest on the back of this Election Results that even before that polarization in u. K. Politics is so massive that the large parties are split over the question of hard versus soft brexit. You have some cabinet members now suggesting there could be continued membership in some new institutions. That in itself is positive news from the european perspective. The downside that the price to pay for this is massive uncertainty and Division Polarization in the u. K. And that makes it very difficult to move forward in the conversation. One thing that has not been uncertain is the weakness of the pound. What kind of pain does that conflict inflict . This is for edmund. Sterling itook at clearly has been weakened. That is provoking higher inflation which clearly impacts on household spending. When you look at the Household Savings rate that are the lowest in the u. K. In 50 years you know dippingage household is into savin